Focus on FOMC meeting

KBC Market Research Desk KBC Bank

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Global core bonds ended mixed on Friday with US Treasuries significantly outperforming German Bunds. The latter ended flat on the day. Disappointing US eco data (empire manufacturing business survey and industrial production) lifted US Treasuries. The US 10-yr yield lost 2.61% intermediate support, accelerating the move. Some final positioning into this week's dovish anticipated FOMC meeting and the end to the US Treasury's mid-month refinancing operation fuelled the upleg further. US yields lost 2.5 bps (2-yr) to 4.2 bps (10-yr) in a daily perspective. Changes on the German yield curve varied between -0.2 bps (10-yr) and +0.4 bps (2-yr). 10-yr yield spread changes vs Germany narrowed up to 2 bps. S&P raised the Portuguese rating from BBB- to BBB (stable outlook) after trading hours.

Most Asian stock market copy Friday's WS gains with China (+2%) outperforming. Saudi Arabia said that the job of balancing the oil market (via production cuts) was nowhere near complete. Brent crude remains just below $68/barrel resistance with many anticipating an official accord at the April or June OPEC+ meeting. Core bonds edge marginally lower this morning.

Today's US eco calendar contains the US NAHB housing market index. Consensus expects a stabilization in March which should help stem fears about an overvalued market. Investors might especially be sensitive to disappointing eco data in the current environment. Any market action could be limited though ahead of Wednesday's FOMC meeting. Fed chair Powell already suggested in front of US Congress to halt the balance sheet run-off by the end of the year. That's much sooner than the Fed originally had in mind and market participants had expected until the turn of last year. Apart from this, we only expect the Fed's plotted rate hikes to drop from 3 currently (2 in 2019 and 1 in 2020) to 1 (in 2019). Long term bond yields will probably remain under some downward pressure in anticipation of a dovish Fed remaining sidelined for longer. Patience will again be the buzz word in the Fed statement. The US 10-yr yield lost intermediate support (2.61%), suggesting a return to the 2.49% bottom channel. The March ECB decision to delay the earliest timing for an interest rate hike into 2020 pulled German yields to their lowest levels since the end of 2016. In combination with the grim outlook, it might mean no ECB rate hikes at all this cycle. The technical picture suggests a return to negative levels for the German 10-yr yield unless we see a pick-up soon in growth/activity data.

The Belgian debt agency holds its first regular tap auction of the year following two successful syndication at which they raised a combined €11bn of this year's €28bn OLO funding need. Bonds on offer are OLO 82 (0.5% Oct2024), OLO 87 (0.9% Jun2029) and OLO 86 (1.25% Apr2033) for a combined €2.5-3bn.

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KBC Market Research Desk

KBC Bank

KBC's Market Research Desk publishes a number of short-term reports.

GBP/USD hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

Pi Network Price Forecast: PI extends consolidation as bulls eye $0.10

Pi Network (PI) price holds steady on Friday, maintaining a consolidating tone for three consecutive days. Mild retail strength in the PI token remains stable, with Open Interest above $9 million, while social buzz eases. PI token’s technical outlook is mixed, as bearish momentum wanes to neutral, with bulls eyeing the $0.1000 psychological level.

Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

Why is Crude Oil priced for a reopening the ships haven't made?

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